Commentary: HP earnings mask weakness in Unix servers

By Paul McGuckin, Gartner Analyst

Hewlett-Packard made headlines yesterday when it reported its earnings for its fiscal third quarter. Although earnings per share of 97 cents represented a 37 percent increase from the same quarter a year ago, a closer look at HP's numbers reveals a key weakness: Unix servers.

HP did well in certain areas,

	See news story: Hewlett-Packard shares skid despite strong sales

including color printers, printer supplies, notebook computers and low-end Unix servers. It showed lackluster performance in monochrome printers, in Windows NT servers, and particularly in high-end Unix servers.

The Unix market overall continues to grow rapidly along with the business world's investment in the Internet. HP has seen demand for its entire Unix line grow much more slowly than those of its principal competitors, IBM and Sun Microsystems.

HP has said that it faces one-time difficulties. For example, businesses may be delaying high-end Unix purchases until HP's next-generation machine, code-named Superdome, becomes available. However, Superdome models will not ship in volume until the end of 2000. Moreover, although Sun faces more extensive product transitions, it continues to see strong growth in Unix.

Strong competitive pressure, especially from Sun, has dampened HP's Unix growth, despite some prominent wins--for example, its server agreement with Amazon.com. Gartner also believes that HP continues to have problems with its sales force. Gartner clients report that HP has relatively low visibility on their short lists of Unix vendors.

This weakness in visibility has dogged HP for the past 18 months, and the latest earnings report reveals that the trouble continues.

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